WTO lead by example

By Invitation / Dr P K Vadueva, Dec 15, 2002, 12.49am IST

IT has been observed that India played an important role in all the four ministerial rounds of the World Trade Organisation (WTO), especially at the Fourth Doha Round in voicing the concerns of developing countries regarding implementation of Agreement on Agriculture (AoA), Agreement on Textiles and Clothing, Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement, Geographic Appellations, General Agreement on Trade in Services (GATS) and so on.

These are critical export sector agreements of the developing countries, including India. New Delhi should "speak up and act for the developing world as a whole" as well as for its own interests, World Bank chief economist and senior vice-president Nicholas Stern said in a special lecture on 'Making trade work for the poor people' organised by the National Council of Applied Economic Research (NCAER) recently in Delhi. Mr Stern said that India has demonstrated its leadership in WTO negotiations when India played a major role in Doha Ministerial on numerous issues, ranging from TRIPS and health to implementation-related issues and concerns. He said India's vocal opposition to the inclusion of investment and competition policy also resonated loudly.

Stating that India should be "tough but constructive" in the negotiations, he cautioned that any threat to retreat to isolation would be "deeply damaging to India" and to the whole process. He said only a few developing countries had policy research capacity to carry out their own analysis of potential liberalisation initiatives. He urged India to lead by example by moving forward through action on unilateral trade liberalisation and overt support for reciprocal trade liberalisation in the upcoming round.

Applying this point further, Mr Stern said that many improvements to India's capability and investment could be made unilaterally, without waiting for international agreements. He said recent World Bank investment climate surveys in India and other countries had zeroed in on areas where improvements could yield large benefits. For instance, clearing customs in India takes three times longer than in high-income countries. In China, he said, the longest delay experienced by firms in the past year averaged just 12 days, while in India the average longest delay was 21 days.

Port congestions and delays mean that transportation costs are much higher in India. The cost of shipping a container of goods from India to the US is 35 per cent higher than shipping from China and 20 per cent higher than shipping from Thailand.

Trade liberalisation during the 1990s led to "productivity gains associated with competition, innovation and the acquisition of new knowledge and technologies all of which has contributed to rising living standards," he remarked. He said that India currently confronts many challenges to sustain poverty reduction. He singled out fiscal reforms, which would free up resources to expand health and education services for the poor and trade reforms to expand employment opportunities. India stands to gain significantly by further lowering of tariffs as it has made tremendous progress over the last decade in this regard. Still, India's trade barriers remain among the most restrictive in the world hurting its own poor people.

Mr Stern pointed out that high-income countries should further open their markets and reduce agricultural subsidies that undercut farmers of the developing countries. "Rich countries can and should take action on a large agenda of trade issues that hurt poor people in developing countries which include tariff peak and escalation tariffs, quotas, agricultural subsidies, anti-dumping actions, arbitrarily defined food safety standards and restrictions on the temporary movement of natural persons like service providers – construction workers, software engineers and nurses."

The rich countries must remove trade barriers in agriculture and textile exports from the developing countries so that these countries get significant gains – substantially higher than the total annual development assistance which is roughly $50 billion a year. These barriers have an adverse effect on job generation in developing countries. In the textile sector alone, saving a job in industrial countries through trade protection costs 35 jobs in developing countries, with the total number of jobs lost because of tariff and quotas in rich countries estimated at 27 million. Gains to developing countries from removing their barriers to trade therefore would be even larger. The World Bank has also urged India to accelerate its reforms to sustain progress in poverty reduction with a view to meeting the Millennium Development Goals (MDGs) agreed upon by the global community.

Though China and India are often compared for each other's progress in the liberalisation path they traversed till date with the credit often attributed to the dragon for managing the change well, India has nothing to fear from China only if it gets its act together on the reform front. This is the broad conclusion of roundtable conference jointly organised by the India Trade Promotion Organisation (ITPO) with the Economist Intelligence Unit (EIU).